Rock-OPERA. The Falklands oil!

 

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There’s aright old Opera down at Rockhopper these days!

“People investing here need to realise the inherent danger in these small cap Falkland capers” so says analysts all across the market over the last few days. So what brought on this volte face? Particularly as these same chins were banding around figures well excess of where the RKH sp currently sits. Has reality set in? Is it a blip? Or have we all been led a merry Falklands south sea dance?

Well it appears that RKH’s CP has refused the rubber stamp needed to back up the oil estimates on Sealion more information is required! Then there’s the dreaded cash-call known to be in excess of a whooping £220 million! However Merrill are still bullish on RKH

” RPS appears to interpret that as sands thin away from the well the distribution of the reservoir could be different from the original estimates. Importantly, we believe that even at this lower level of contingent resources SeaLion is still economically viable as a stand alone development.

– In contrast, management interpret the data differently and remain confident that SeaLion still offers significant upside – potentially considerably bigger than the auditors’ estimates as new sand bodies were identified in the lower fan. Given that the data set is work in progress and was meant to evaluate drilling locations and not offer a definite answer on sand thickness, the final answer to the puzzle will only be known after the company drills new holes next year”.

As are a whole host of other big names. Cannacord

“The reason for the downgrade from 242m barrels recoverable to around 170m barrels? Quite simply that the independent Competent Person currently compiling a CPR for the group believes it does not currently have sufficient info on the multiple stacked fans that make up the Sea Lion overall structure to agree with RKH’s estimates. Some of these stacked fans have yet to be penetrated by a well, hence the uncertainty. Perhaps RKH was being overly optimistic on reserves, perhaps the Competent Person is being overly cautious – reserves determination on limited data is highly subjective. RKH also says that as a result its CPR has been delayed into H2-2011 until further 3D seismic has been acquired and further drilling has taken place”

Unfortunately the problems besetting the Falklands oil campaign are myriad and many. Every company out there will require further capital raising. As for what price level on RKH TRY 200/250P! I know that’s going to hurt many investors but these are the figures being talked of here!

As for my opinion RKH have had a fantastic ride hitting over 500p! I sorely hope that most of the Blogosphere cashed in their chips at the higher levels!

For those who are planning to hold through thick and thin what next? Well a good dose of alcohol on a daily basis may help! And a crash course in CPR!

Good Luck

Daniel

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No Responses

  1. robert says:

    dan /offsub/ how big could e.o be in your honest opinion/regardsrob/

  2. 13thMonkey says:

    Hi Dan,

    Interested in your level of 200/250. How is that arrived at? Like you say, there’s uncertainty about the levels of oil recoverable, but not down to >50% less than originally thought (?), and there still seems a reasonable possiblilty that the RKH board will turn out to be correct about their estimates.

    Is there now an overall doubt about the RKH board/geologists now that they potentially called it wrong on such an important issue?

    Separately, wouldn’t you anticipate that any good news from Desire’s continuing drilling campaign will have a positive effect on all explorers in the region?

    Thanks as always,

    M

  3. bobbyshafto says:

    I don;t think RKH will ever go over 500p again Dan, shorters well into the stock now.

    DAN you gotta be loading up with CAD now, keep watching and get buying.

  4. Biggleswick says:

    For some reason known only as gut instinct I feel that RKH wll survive this turmoil and not only make it to the FTSE250 but be back up to £5+ in the not too distant future. Once excitement builds about their somewhat luckier acreage and a revised CPR is released where we know EXACTLY where we are with Sea Lion, then things will once again begin to bubble. The great thing about oilers is they never stay down for too long by the very nature of the build up to a drill that may contain millions of barrels of oil. I was more weary of DES due to the enormous hype mostly by faceless ramper tyes. I set up home with that which had oil long ago and will continue to hold my RKH. Interesting times ahead for old Rocky I think.

  5. Nick says:

    This is funny,

    £220m raised at 200-250, on the back of what? the fact the charges failed in the lower part of the well and so they don’t have the data at the moment to upgrade reserves?

    Look, they need to raise cash, a child can see that, one appraisal with a better flow test using correct equipment in a better location, plus upcoming seismics will provide all the data RPS need. It will take a few months but it won’t cost £220m (lol)

    pretty clear to me that the placing was done at 280p friday, via ML, and is for around £80m, to get them through the next stage, further dilution will happen at a higher price should the next stage be successful.

    It never ceases to amaze me that sites like this, where amateurs pretend to be professional, jump on the doom band wagon.

    If you can’t handle 50% swings, and large placings at silly prices, don’t invest in AIM E&P’s with less than 200m shares in issue

    280p is a great buying opp if you have a 6 month outlook

  6. robert says:

    dan gizz a kiss regards rob

  1. 15 October, 2010

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